Discount Strategies to Maximize Profits
There’s a reason why shopping events like Black Friday, Boxing Day and Amazon Prime Day are so widely successful: consumers love discounts. And because retailers know this, discounts are ubiquitous, to the point where some brands are known as discount retailers, relying heavily on permanent discounts or “buy one, get one” tactics to attract bargain hunters. This can work well for retailers like TJ Maxx, but it has spelled disaster for brands like Payless.
So how do you find incentives that appeal to customers without losing profit to discounts gone wild (or having to compensate with markups that are so high that they turn shoppers away)? There are two great solutions:
1. Give out promotional gift cards with purchases over a certain amount as an incentive for customers to come back and spend more.
2. Use a loyalty program to offer your most valuable customers discounts that boost their spending.
1. Use Promo Cards to Limit Your Liability
We know what you’re thinking: by law, gift cards can’t expire, so you’d have to honour their value years into the future. How could carrying a liability be better than discounting?
Unlike gift cards, promo cards expire. In other words, they have value only if they’re redeemed before a specific date. What does that mean for you? With the right gift card solution, you could know the exact value of all promo cards in circulation and control your total liability.
What’s more, whereas consumers usually have to spend money to purchase a gift card, they’d receive a promo card for free, with a purchase. For example, with every purchase made in November and December, you could offer customers a promo card that gives them $25 off when they spend $100 or more between January 15 and 31.
Your finance department will thank you for knowing precisely when they can write off promo card values, and your customers will feel grateful for having received “money” to spend at your store during their next visit. It’s a win-win!
2. Up Your Bargaining Power and Incentivize Return Visits
Promo cards can also help you more easily sell durable items, like a vehicle or a pool.
Let’s say you’re asking $30K for a car, but a customer tries to negotiate you down to $28K. Lowering the price would not only affect your product’s average cost, but also lower your salesperson’s commission. Offering the $2K difference on a promotional gift card gives you an extra bargaining chip independent of your profit.
Once the customer has a promo card to spend, they’ll be more likely to visit you for accessories or their first service call, giving you a chance to impress them with your service and keep them as a customer for life.
Whether or not the customer redeems the promo card before it expires, you won’t lose a dime off of your initial sales price.
3. Offer Exclusive Discounts to Your Most Loyal Customers
One of the benefits of offering a loyalty program to your customers, is that you can allocate your discounts where they will make the biggest impact.
Because loyalty members spend an average of 25% more per visit than regular customers, it's worth offering appealing discounts to increase how much and how often they spend with you.
Instead of offering promotions to anyone, you can limit them to loyalty members which will make your members feel special and entice more customers to sign up for your program.
4. Prevent Fraud and Track ROI
Offering discounts through promo cards or a loyalty program will allow you to track your return on investment more easily than if you were to use other methods like coupons.
You may ask what the difference is between a coupon and a promo card, since technically, they’ll both give you a rebate on your purchase.
Unless you’re dealing with a highly trained fraudster, the average consumer can’t easily counterfeit or hack a gift card. The same can’t be said for coupons or discount codes, which can easily be forged, copied or shared. (Maybe be sure to pick a gift card provider that prioritizes fraud prevention and management in the first place, just in case.)
Another point to consider: if you issue hundreds or even thousands of coupons, you can’t predict how many people will use them or calculate the effectiveness of your promotional campaigns, especially if coupons are redeemed across multiple locations. Who has the time to manually add them all up?
With online reporting that come with Paystone gift card and loyalty solutions, you can analyze your ROI. Our real-time dashboard allows you to easily track exactly how many promo cards have been issued and redeemed, as well as which locations are experiencing the best results.
If discounting your products is your go-to way to attract customers in store, it might be time to consider a gift card program that includes promo cards or a loyalty program as a means to increase repeat visits and boost your profit.